Good day, ladies and gentlemen, and welcome to the Coherent third quarter 2010 earnings conference call hosted by Coherent, Inc. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks we will conduct a question-and-answer session. (Operator Instructions).

As a reminder, this call is being recorded. I would now like to introduce Ms. Helene Simonet, Executive Vice President and Chief Financial Officer. You may begin your conference.

HeleneSimonet

Thank you, [Jenita]. Good afternoon and welcome to Coherent's third quarter conference call. On today's call I will provide financial information and John Ambroseo, our President and CEO, will provide a business overview.

As a reminder, any guidance and any statements in today's conference call pertaining to future guidance, plans, events or performance are forward-looking statements that involve risks and uncertainties and actual results may differ significantly.

We encourage you to refer to the risk disclosures and critical accounting policies described in the company's reports on Forms 10-K, 10-Q and 8-K as applicable and as filed from time-to-time by the company.

The full text of today's prepared remarks, which will include references to historical bookings and sales by market, will be posted on the Coherent investor relations website. A replay of the webcast will be made available for approximately 90 days following the call.

Let me start by mentioning that we had another outstanding quarter with record bookings, revenue and operating profits. Our revenue grew 12% sequentially with a corresponding pro forma earnings growth of 48% and a GAAP earnings growth of 70%.

We achieved pro forma income of $0.66 per diluted share compared to a pro forma income of $0.45 per share in the previous quarter. Our pro forma EBITDA percentage for the quarter was 19.7% compared to 16.6% last quarter.

During the quarter, we completed the Beam Dynamics acquisition for $6.25 million and we repurchased approximately 477,000 shares for $16.8 million.

Net sales for the third quarter grew 11.8% sequentially which is primarily the result of a record microelectronics quarter coupled with solid growth in the materials processing market. Increases in microelectronics can be attributed to significantly higher solar, advanced packaging, and semiconductor revenues.

Solar revenues were exceptionally high and reached $13 million this quarter with the majority recorded against the large order of $22 million that was booked in the first quarter of this fiscal year.

Materials processing was strong in non-metal cutting and marking applications and OEM Components and Instrumentation growth was dominated by strength in the bioinstrumentation market.

As anticipated, scientific revenues declined when compared to the first half run-rate as we are now seeing less stimulus money; scientific is returning to a more GDP growth business.

Geographically, Asia represented 38% of the third quarter revenues resulting from a growing microelectronics business for which the customer base is strong in Asia. The company’s sales by market application for the third quarter are as follows: Scientific $33.7, Microelectronics $69.6, Material Processing $23.3, OEM Components and Instrumentation 40.1 for a total of $166.7 million.

The third quarter gross profit was $74.3 million or 44.6% of sales. On a pro forma basis, excluding $0.8 million restructuring and compensation charges, pro forma gross profit was 45.1% compared to 44.6% last quarter and 37% a year ago.

The sequential improvement was primarily the result of favorable product and market mix and positive leverage from increased sales volumes, partially offset by higher exit costs related to the StockerYale asset acquisition. The significant improvement versus last year is clearly the result of a sizeable increase in revenues, the positive impact of the manufacturing restructuring activities and a more favorable mix towards commercial markets.

Pro forma period expenses of $49.3 million, excluding $2.6 million for restructuring and stock compensation charges, decreased $0.7 million from the previous quarter and represent less than 30% of revenue compared to 33.4% last quarter.

The higher gross profit and lower operating expenses resulted in a pro forma operating income percentage for the quarter of greater than 15% of sales.

Our cash and cash equivalents balance for the quarter was $254 million, representing a sequential decrease of $11 million. The decrease is primarily due to the previously mentioned cash expenditures for the Beam Dynamics acquisition and our stock repurchases.

Cash flow from operations for the quarter was approximately $22 million. Capital spending was $4.4 million, or 2.6% of sales, resulting in free cash flow of approximately $18 million for the quarter.

We continue to be pleased with our working capital management results; inventory turns increased from 3.4 last quarter to 3.7, which represents another record for the company. Accounts receivable DSO of 53 days is slightly higher than last quarter, a remarkable result though particularly since 68% of our revenue is generated from international customers.

I will now give you the guidance for the fourth quarter. Revenues in the fourth quarter can range from $162 million to $170 million depending on the timing of certain tool deliveries. As indicated before, the third quarter included $13 million of solar revenue and this magnitude of solar revenue will not be repeated in the fourth quarter.

In addition, due to customer constraints, it is uncertain when the remaining tools of the $22 million order will be shipped; there is approximately $6.5 million left to ship against this order.

We project pro forma gross profit to be similar to the third quarter at approximately 45%. Pro forma period expenses, which exclude stock compensation and restructuring costs, are projected to be in the range of 30.0% to 31.0% of sales. This includes intangible amortization of $2.1 million. The range is slightly higher than the prior quarter primarily due to the timing of certain research and development costs.

Stock compensation charges are estimated to be approximately $2.2 million. During the quarter, we decided to delay the Finland exit until at least the end of the calendar year. Although we postponed the exit, we proceeded with the sale of the building and we plan on recording a loss on this transaction in the fourth quarter.

Restructuring costs including the loss on the sale of the building will be approximately $4.5 million of which $3.4 million relates to cost of sales.

Other income and expense is forecasted to be minimal as interest income is estimated to be immaterial to the results and we are assuming a annual tax rate of 35%. We anticipate our capital spending for the year not to exceed 3% of sales.

I will now turn over the call to John Ambroseo, our President and CEO.

John Ambroseo

Thanks, Leen. Good afternoon, everyone, and welcome to our third fiscal quarter conference call. The third quarter was very good for Coherent as we achieved record revenues, record orders and record operating income.

We have capitalized on investments made over the past few years, especially in microelectronics and instrumentation, our highest margin markets. We shipped our 1000th Paladin laser and will soon ship our 1000th Chameleon and 2000th Genesis MX lasers.

We also completed the transfer of our Montreal commercial laser operation according to schedule. Our other business metrics are in very good shape including inventory, receivables and cash. Coming off some key design wins, our product pipeline is brimming.

We set a record for quarterly bookings with third quarter orders of $180.6 million, representing an increase of 9.8% sequentially and 103.7% versus the prior year period. Total bookings and growth were fueled by the commercial markets where new applications and technology took root and improving customer confidence led to a return of longer-term orders. The book-to-bill for the third quarter was 1.08.

Orders of $32.6 million in the scientific market were down 2.6% versus the prior quarter and were up 15.2% from the prior year period. With stimulus funds nearly exhausted, scientific bookings are reverting to pre-stimulus levels. Some stimulus money remains in the US but it does not appear to be targeted at laser applications.

Orders for Chameleon lasers led all major product categories as biological imaging continues to attract research funding, especially within Asia. Recognizing this trend, we have been working with various partners to add tunable light sources to Chameleon and other ultrafast lasers that extend the spectrum of available colors. This is enabling researchers to study new phenomena.

We are also pleased that bookings for the OPS-based Verdi G product line were up again as the product continues to gain traction with researchers.

Orders of $46.3 million for instrumentation and OEM components were up 29.8% from the prior quarter and 80.6% versus the prior year period.

The continued rise in elective ophthalmic and aesthetic procedures led to higher orders in Q3 for Existar excimer lasers used in refractive surgery and our G- and GEM Series CO2 and Genesis OPSL lasers for non-refractive ophthalmology.

We are also monitoring some new techniques that hold promise to improve treatment of certain eye diseases including diabetic retinopathy, a disease that is unfortunately on the rise around the world. If this technique works as advertised, it would represent the biggest breakthrough in photocoagulation therapy in decades.

The life sciences market is enjoying significant investment, especially in Asia, which has led to a meaningful increase in instrumentation bookings. The underlying product trends are favoring higher power, higher ASP lasers that are differentiated compared to competitive offerings. We are also seeing greater interest in beam shaping optics that enhance detection sensitivity, thereby boosting performance.

Record-setting orders of $73.5 million for microelectronics were up 2.4% sequentially and 234.9% versus the prior year period. Bookings for semi cap equipment reflect the broader trend in the market and are running at more than twice the rate compared to a year ago. Given the product mix, part of the demand will relieve short-term IC shortages. We are also taking orders for advanced nodes to support new products, which should continue into fiscal 2011.

Advanced packaging orders have increased more than 60% sequentially and 250% compared to the prior year period with all submarkets contributing. The activity in the LED space can only be described as frenetic with approximately ten new fabs opening this year to satisfy demand for LED televisions and lighting.

We have also secured several key design wins for silicon singulation and scribing, which will contribute to future bookings and revenues. The continued growth in mobile communications and computing -- you can think smartphones here -- is fueling orders for via drilling, while overall consumer electronics growth is benefitting laser sales to direct imaging applications.

Orders for flat panel display manufacturing were lower following a record-setting Q2, but there is no shortage of opportunity. Small format AMOLEDs used in smartphones have grown by more than 50% in the past year and are poised for more growth.

Our excimer laser annealing systems were used to produce the overwhelming majority of these displays. Despite the success of OLEDs, LCDs remain a force in the marketplace due to products like Apple’s iPhone and iPad. The continued adoption of these and similar products will require further capacity buildouts. We anticipate that these orders will be placed in the next two quarters.

Annealing is not our only play in FPDs. We also provide CO2 lasers used to make light guide panels for LED TV’s, diode lasers to seal OLED displays, Q-switched lasers to create touchscreen sensitivity and a couple of different solutions to cut glass. These applications accounted for the bulk of our FPD bookings in Q3.

Our first set of Equinox solar tools have been installed and are in production mode. Initial customer feedback is consistent with our expectations. We have engaged with other Tier 1 customers and received the first development tool orders. Our engagement with SiOnyx to develop the black silicon applications for solar cell marketing is progressing and we look forward to beginning customer trials.

Materials processing orders of $28.2 million increased 19.5% sequentially and 120.4% versus the prior year period. Low end marking and engraving utilizing CO2 lasers led the materials processing recovery over the last few quarters. This trend continued in Q3 for the textile and leather market.

We are now seeing the first signs of recovery in high-end marking and engraving that utilize higher power CO2 lasers, UV solid-state lasers or laser diodes. Typical applications would be in high-end consumer goods including electronics. As you might expect, China is the epicenter for much of this growth through direct sales or imports.

We have not yet seen signs of sustainable recovery in the macro market. Nonetheless, we have made inroads with the E-1000 CO2 laser. We have delivered lasers that will be used for 3D, robotic cutting of interiors, which is a sizable market. The combination of performance and footprint were pivotal in capturing this opportunity.

We are also fielding strong interest from flatbed cutting customers that constitute another large market. We remain confident in the long-term potential of the E-Series portfolio.

We completed the Beam Dynamics acquisition in April and the move to our Santa Clara facility was finished last week. We are starting to build the order book and look forward to bringing this innovative and cost-effective solution to the broader market.

As I reported last quarter, rising demand for semiconductor products was causing us to reevaluate the timing of our planned exit from our epitaxial growth facility in Finland. Our strong third quarter bookings combined with our customer commitments for the fourth quarter necessitate extending the Finland exit at least through December. I’ll provide another update during our fourth quarter conference call.

We are pleased with the results and I would like to congratulate my colleagues for the outstanding job they’ve done in managing through a highly turbulent period. There’s still more work to do.

We will continue to focus on design wins to secure future growth opportunities, to improve the cost of ownership to enable new markets and seek to become even more efficient to drive the bottom line.

As the clear leader in three of the four verticals we serve, our mission is simple: maintain our strong customer alignment and deliver products with superior reliability and performance. We remain committed to expanding our position in the materials processing market at the laser and system level. Early customer feedback has been encouraging and our efforts should be aided by a recovery in the macro materials processing business.

We’ll be presenting at the CJS New Ideas conference on August 17 in White Plains, New York and we look forward to seeing some of you there. Due to a prior commitment, we will be unable to attend the Longbow conference in New York on September 16 and we wish them success with the event.

I’ll now turn the call back over to [Jenita] for the Q&A session.

Question-and-Answer

Operator

(Operator Instructions) Your first question comes from the line of Larry Solow - CJS Securities.

Larry Solow - CJS Securities

The first question, Leen, just on your gross profit estimates for next quarter, a couple parts to it; so the exit cost from StockerYale I imagine that was one time related in third quarter and wouldn't that drop a little bit going forward?

Helene Simonet

The exit costs were one time in Q3.

Larry Solow - CJS Securities

Right, so I'm just trying to figure out what -- to me, you have that and it looks like your mix of OEM and microelectronics is still two of the faster growing categories and two of the higher gross margin areas, so just curious as to -- perhaps maybe you would get a little bit of a lift sequentially.

Helene Simonet

You may have noticed that I cautioned you on the swing with the solar revenues. That is predominantly the reason for holding it at 45%.

Larry Solow - CJS Securities

So solar has obviously higher margins too. Then does share repurchases -- did most of those occur towards the end of the quarter or was it spread out?

Helene Simonet

They happened predominantly in May and you may not have seen the reduction because they were not outstanding -- the reduction wasn't outstanding for the entire quarter. So we saw little impact in the third quarter. We'll see more impact in the fourth quarter.

For diluted shares, however, as the stock price is higher right now there will be more options on the way and that increases the diluted calculation as well.

Larry Solow - CJS Securities

Then just looking at any -- as you go forward in the next few quarters and into calendar '11, obviously there are some worries on the economic front, more in Europe. Any view as to your marketplace, any changes; it sounds like most things are still -- everything seems to be going pretty well. Any changes more recently, anything, any color on that.

John Ambroseo

Larry, it's John. We're watching these macroeconomic factors just as everyone else is. The European situation for us -- and I would suspect probably for our broader industry -- has not yet been an issue because the majority of the commercial customers in Europe are export minded and they are selling into the Asian end market which is on fire right now.

So we haven't seen any significant changes in the European customer posture. For the research market in Europe we've already seen statements from many leaders that they intend to maintain or expand their research funding. The one obvious difference there is the Cameron government in the UK which is talking about some fairly massive budget cuts.

The UK is such a small piece of the overall business for us that it probably has no noticeable impact.

Operator

Your next question comes from the line of Mark Douglass - Longbow Research.

Mark Douglass - Longbow Research

Leen, if we can talk about the period operating expenses in the quarter, they were pretty low I think versus what you had guided. R&D stepped down sequentially. Any particular reason for that, just really good cost containment or some things fell off that are going to come back?

Helene Simonet

The R&D was lower and that's mainly due to timing of certain NRE contracts. That's in the guidance. I guided a little higher, main reason being that the development costs in R&D spending will increase compared to Q2. So Q2 was a little lower and remember that our Q2 number was significantly higher because we had some material costs in there to start new product development. But you will always see some fluctuation in it. But Q3 was low because of NRE contracts.

Mark Douglass - Longbow Research

So then it's normally going to be around 12% then? Is that fair?

Helene Simonet

I think 12% is probably high.

Mark Douglass - Longbow Research

Maybe 11.5% or something. Then can you clarify the $162 million to $170 million guidance does not assume shipments of the solar order?

Helene Simonet

The low end does not assume shipment. The high end does.

Mark Douglass - Longbow Research

Then going forward, any reason why we couldn't see gross margins start to move past 45% or is it really going to take the exiting of the Finland property to really start seeing that move? I mean, of course, that's assuming volumes are flattish.

John Ambroseo

Mark, it's obviously an excellent question. When we look back to where we were several years ago, when we announced this major restructuring plan, we talked about pro forma EBITDA being in the 19% to 23% range.

That assumed several factors, obviously a step up in gross margin as well as reductions on a percentage basis in period expenses and R&D. We're at the lower end of that EBITDA range right now but on lower revenues than we had forecasted at the time. So you can think about it as we're doing a little bit better than we had predicted three years back.

To the extent that we get continued revenue growth and that the mix remains favorable, which were two of the conditions that we had outlined going back three years, then pro forma EBITDA should start to creep up. That will not happen by just driving down expenses. It's got to be a combination of gross margin improvement as well as better leverage on the expense lines.

As we look at some of the factories, the statement that we made -- and I'm going from recollection here -- but I think we talked about our revenues in the $725 million to $750 million range on that three-year time horizon and we said that we not only had the right level of infrastructure to support that.

That’s still largely true today. We're running single shifts in most areas so there's some leverage that we can drive by putting more through certain factories. There's one factory where we're running up against limits because we're already implementing a third shift and that factory is going to see some expansion in the next couple of quarters.

But it's a long-winded way of saying as long as revenues climb and it's the right product mix then, yes, you should see higher gross margins and lower operating expenses as we leverage those two items.

Mark Douglass - Longbow Research

Do you have a hiring freeze on right now or I assume you're still just trying to limit hiring and go to more overtime and that kind of thing?

John Ambroseo

Given the growth that took place, we reduced significantly last year as most companies did and we also put temporary measures, [frolow] programs in place. As we mentioned in a prior conference call, we've released all of those temporary measures and we have done some hiring to address capacity and specific needs.

A lot of the hiring at this point is temp workers that may convert to full-time positions if this is a long-term sustained recovery.

Operator

Your next question comes from the line of Ajit Pai - Stifel Nicolaus.

Ajit Pai - Stifel Nicolaus

A couple of quick questions; I think the first is just looking at the order momentum that you talked about outside of the solar shipment that you had but just looking at the order book. Do you think that the current trajectory of increasing orders that you've had now on a sequential basis for a while, do you think it can continue for a few more quarters or do you think that we are sort of reaching a peak right now in an order rate?

John Ambroseo

That's a challenging question to answer because we're so diversified. If I take the microelectronics market as an example, because so much of our growth has come from that market, what we're hearing from customers is that we need to be planning for several more quarters of sustained demand.

What I think is quite telling, when we look at the Q3 order book there aren't orders that jump off the page at you and go, oh, wow, this $20 million order really drove the improvement. It was pretty widespread. That, to me, signals a fair amount of confidence from the customer base in moving back to long-term orders rather than these short-term either monthly or quarterly-type orders.

Ajit Pai - Stifel Nicolaus

Then the second question would be just uses of cash. Could you sort of give us some color as to since your balance sheet is so solid, your cash flow generation is tremendous, how you're going to be prioritizing the use of cash and what the acquisition pipeline looks like right now?

John Ambroseo

So we've long said that at least the two priorities for us were to look for opportunities to increase revenue for acquisition and to selectively take some shares off the table. We were able to do some of the latter at the beginning of last quarter and we were pleased to be able to do that.

As we look at the M&A pipeline, there's really no shortage of opportunity. It really comes down to what do you want to execute on? While it's a very small community, so I can't be too specific at the kinds of things we're looking at, I'd say they fall largely into one of two opportunities and there's not going to be any earth shattering news here.

The first is to look at opportunities where we can reach into new market opportunities either from a technology standpoint or an application standpoint. We're exploring some number of those.

The second one is to look for opportunities similar to what we did with StockerYale, businesses that are complementary to our existing product line where we can gain meaningful leverage on an operations basis post acquisition.

So those are the two things that are largely driving our M&A activity right now and we do hope to be able to close on some of these in the not-too-distant future but it is a very active process as you might imagine. The fact that we have so much cash is attracting lots of people.

Operator

Your next question comes from the line of Jiwon Lee - Sidoti & Company.

Jiwon Lee - Sidoti & Company

John, the first question is for the LEDs, previously I was under the impression that that wasn't particularly a big market, so could you talk a little bit more about the market opportunity as a laser vendor and if you could talk about how big this particular market, LED, is within your microelectronics?

John Ambroseo

So to answer your question first, the LED market has developed into a sizeable opportunity over the past few quarters, particularly as we brought some new technology to bear. It's been a large market for a while but not one that we had fully participated in until we made some course corrections in terms of the technology portfolio.

In terms of size, the numbers that I'm seeing -- and you can pick this up. I think it's either on the semi.org website or the SIA website. The numbers that I’m seeing are millions of wafer starts per year for both lighting, LED television display, etcetera.

What that translates into ultimately in terms of equipment is difficult for me to put a number on but it is probably one of the biggest opportunities facing the microelectronics market today.

Jiwon Lee - Sidoti & Company

So how you're participating to the market is sort of similar to the solar side of business?

John Ambroseo

Well, solar we have two plays. We well lasers that go into that market and we're selling tools that go into that market. For the LED market it's predominantly as a light source vender and whether that's for scribing and singulation applications or whether that's for packaging applications, it largely is the light source vender.

Jiwon Lee - Sidoti & Company

Then going back to -- staying on to the microelectronics, if you have to pick -- you're seeing several more quarters of fairly sustained demand here, so if you kind of have to pick within the submarket, where do you feel you have a strength for your business right now?

John Ambroseo

In the microelectronics?

Jiwon Lee - Sidoti & Company

Yes.

John Ambroseo

This is going to sound terrible but it's an embarrassment of riches. We're pretty well positioned in semi cap because of some key design wins that we've secured over the past few years. I made a comment about that I think over a year ago where I said the design wins would secure a leadership position in semi cap for the foreseeable future. That hasn't changed.

The flat panel display market is unbelievably active right now. The success of touch screen devices is driving a tremendous amount of demand and we're one of the leading suppliers for equipment that go into that and it really appears to be as close to unabated demand as you can get.

When you look at LEDs, I mean, most of us think about LEDs because they make great televisions. But when you start to think about it on a global basis, I mean, some of the statistics that I've looked at recently -- and I have to commend my staff for getting this stuff under my nose -- I think it's something on the order of 20% of global electricity consumption is for lighting and LED lighting compared to conventional lighting throws about half the power.

So when you look at that kind of change and what it can do to energy consumption, fossil fuels, etcetera, I mean, these are big needle movers. We're very fortunate to be well-positioned in all of those opportunities with a great option play on the solar market.

Jiwon Lee - Sidoti & Company

Then one more question on the microelectronics. Are we sort of at a place where we could be excited about the OLEDs yet?

John Ambroseo

I'm sorry. I didn't hear the end of that.

Jiwon Lee - Sidoti & Company

The OLEDs, are we at a place that we could be excited about this market opportunity yet?

John Ambroseo

That we could be excited about it?

Jiwon Lee - Sidoti & Company

Yes.

John Ambroseo

We've taken I think two traunches of significant orders for OLED manufacturing already. As best we can tell, more are on the way. The orders that we've taken for OLED touch, as I've mentioned a couple of times here, multiple technologies, the biggest one, of course, being the Annealing piece where those tools are -- each tool is a multi million dollar sale.

So they're very big numbers and we've taken -- I think we took one for almost $14 million in Q4 and then in Q2 I think it was $11.5 million or maybe it was reversed, but two very large orders already with more orders that could be that kind of magnitude on the table.

Jiwon Lee - Sidoti & Company

Could you talk about how many E-1000 you have shipped during the quarter and what type of materials processing they may address?

John Ambroseo

I won't disclose exact numbers and I'm sure you can understand why. But what we're focusing on is I'd say two or three distinct opportunities. One is the flatbed cutting market, as I mentioned, where the flexibility of the tool to be able to handle both organics and metals is a pretty compelling argument; then the emerging opportunity in the automotive market where the compactness of the E-1000 really lends itself to streamline cutting applications; those are two pretty sizeable markets. If we can get a toll hold in those, the E-1000 will meet or exceed any expectation we set for it.

Jiwon Lee - Sidoti & Company

Lastly from me, how big of a market is China for you and any indication that things are different recently?

John Ambroseo

I don't know that we've ever disclosed exactly the percent of the Chinese market. I think we've just put three buckets, North America, Europe and Asia. Asia in this last quarter I’m going to ask Leen to -- 38% of revenue which is among the biggest numbers it's been. That's very consistent with the shifts in manufacturing that we're seeing globally. So we're fully participating in that.

As far as China goes, one of the things that we and I think every other tech company around -- and it may be extended beyond tech companies -- is we're seeing a massive opportunity but we're also very keenly watching government regulations and how that will influence how or perhaps the best way to participate in that market.

Operator

(Operator Instructions) Your next question comes from the line of Mark Miller - Noble Financial.

Mark Miller - Noble Financial

Just wanted to talk a little about the solar; Solyndra had some trouble raising some capital recently. Has that affected the solar market in general or is that more specific to kind of what's going on at Solyndra?

John Ambroseo

I can't opine on exactly what Solyndra may be dealing with. We watched it, as everyone else, and they tried to raise some cash and I guess they couldn't get the pricing. The solar market remains one of these markets that has tremendous promise but our thesis on the solar market hasn't changed.

You've got to get the grid parody in order to make it fly. While the market itself for panels and cells may be improving, the capital equipment side of the equation is still in a wait and see mode and this is why we've put our emphasis around technologies that have the potential to reduce the cost to manufacturer or to increase the quantum efficiency, or both, as a means of driving to a grid parody as fast as possible.

That has been the emphasis of what we do. If you look around the solar industry there are a number of companies that are struggling right now there to get their costs under control and to get product out the door. That is a compelling investment for the consumer.

Mark Miller - Noble Financial

Would I be presumptive to think that if we don't get -- you don't get solar ships this quarter, they slide into the December quarter?

John Ambroseo

It's hard for us to answer that question because we're operating under a confidential disclosure agreement with the customer. So the issues that they're dealing with are their issues and we can't talk about them. So whether it ships this quarter, next quarter, the quarter after, we won't know until they know and we certainly can't say anything until they've signaled to the marketplace what's going on.

Mark Miller - Noble Financial

Following some companies that are immensely benefiting from the LED opportunity, just a little curious; you seem to be coming in a little later in that opportunity compared to other companies but you said you've seen a noticeable growth in the size of the market over the last couple quarters. Is there a reason for that? Is it more that you're back-end there or is it just they've decided to adopt your technology on a wider basis more recently?

John Ambroseo

As I mentioned in response to an earlier question, part of what we needed to do was to bring out solutions that were more compelling than what was in the marketplace and we've done that and as a result we're gaining very meaningful traction in the LED space.

Mark Miller - Noble Financial

Do you see any differentiation in terms of the demand from your product, whether it's from general lighting or backlighting in China versus Taiwan or Korea? Is it just uniform, the demand for your product, or located in one area geographically or product wise?

John Ambroseo

I think the challenge that you always deal with in China, regardless of market, is home grown competitors and some of this it's-good-enough mentality. So China clearly is one of the more challenging places to do business particularly for very high-end equipment but we're doing okay and the other geographies we're doing well.

Operator

At this time, we have no further questions in the queue. I will turn the call back to John Ambroseo for any additional or closing remarks.

John Ambroseo

I'd like to thank everyone for their participation in today's call and we look forward to catching up with you at the next conference call which will be the final for the fiscal year. Have a good day.

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